These Phantom Costs Are Keeping You Broke

Ben Le Fort
Jul 29 · 6 min read
a shadowed figure behind a curtain raising a hand up. It looks to be a ghost or a phantom.
a shadowed figure behind a curtain raising a hand up. It looks to be a ghost or a phantom.
Photo by Steinar Engeland on Unsplash

Most people who are nerdy enough to follow a personal finance blog are probably pretty good at keeping track of their expenses. Chances are if you are reading this, you have a budget.

(If you don’t have a budget, read this article on how to create a simple budget today).

A budget is a useful tool to help you formalize your financial game plan. A strong budget paired with an automatic savings system can ensure you reach your financial goals.

However, a budget is only as good as the information you feed into it. Budgets are like a game of Jenga, remove one building block and the whole thing comes toppling down.

Phantom expenses are killing your finances

If you fail to account for all your expenses, you will end up with a budget that is underestimating your costs. If you underestimate your costs you will fail to reach your savings goals, and this can cause a great a lot of frustration and discouragement.

The reason most people fail at budgeting is that they fail to account for their “phantom expenses”. These are the expenses that are not daily or recurring expenses. This makes it easy to forget about when you are creating a budget.

The three big phantom expenses

The most common examples of phantom expenses include;

1. House maintenance and renovation costs

2. Car repairs

3. Medical costs

Phantom homeowner costs

When homeowners budget their housings costs, they typically account for the predictable costs.

  • Mortgage payments
  • Property taxes
  • Home insurance
  • Homeowners Association (HOA) fees
  • Utility bills like electricity and heat

There is a whole other category of unpredictable costs associated with owning your own home that most people fail to include in their budget.

Mandatory maintenance. The problem with owning a property is that it needs constant repairs. Whether it be a new roof, a broken toilet, a leak in the basement there is no end to home repairs that you need to attend to as a homeowner. Those repairs add up to a lot of money over time. The average homeowner spends $2,016 per year or $168 per month on general maintenance costs.

These costs can be difficult to plan for in a budget because nobody knows when your basement is going to start leaking. Some months you’ll spend $0 on repairs and some months you’ll spend $5,000. That’s why as a rule of thumb, it is recommended you budget at least 1% of the value of your home for annual maintenance costs.

If your come costs $300,000 you need to budget at least $3,000 per year or $250 per month for home repair costs.

Home Renovations. We live in an HGTV world where there are literally dozens of television shows dedicated to home renovations and house flipping. As a culture, we are obsessed with home renovations and it is hitting our wallets. One study found that in 2018 homeowners spent an average of $6,649 on home renovations. That works out to nearly $555 per month! I have yet to meet someone who budgets over $500 (or any amount) into their monthly budget for home renovations.

Luxury home services. These are expenses such as landscaping, snow removal, house cleaning, alarm system, and pool maintenance. The average homeowner spent $638 or $53 per month on these services last year.

When you add up all the phantom costs of homeownership you realize a house can quickly become a money pit.

Phantom car costs

Homes are money pits that usually appreciate in value. Cars, on the other hand, are money pits that depreciate in value, making them the ultimate drain on our net worth. If you have a car, you need to budget for a lot more than the monthly loan payment which is $550 on average.

Like houses, cars need constant upkeep. If you drive your car 15,000 miles per year here is what you can expect to pay in additional costs according to Nerd Wallet.

  • Maintenance: $99 per month
  • Gas: $149 per month
  • Insurance: $98 per month
  • Registration and other fees: $12 per month.

Add it all together and the cost to keep the average car on the road is $908 per month. Look at your personal budget and see how much you’ve budgeted for car-related expenses. Have you accounted for the phantom costs like registration and maintenance?

Phantom healthcare costs

If you live in the United States, budgeting for healthcare can be an incredibly difficult task. It’s impossible to predict what services you will need and how much those services will cost. In 2016 the average American spent an estimated $10,345 on healthcare costs. That works out to $833 per month.

How phantom costs wreck your budget

To demonstrate the impact that phantom costs have on your finances consider a hypothetical example.

  • Let’s say you are single, make $60,000 and live in Ohio.
  • After taxes, your tax home pay would be $47,500 per year or $3,958 per month.

Standard Monthly budget without phantom costs

  • Mortgage: $500
  • Property taxes: $175
  • Utilities: $75

Total Housing: $750

  • Car Payment: $550
  • Gas: $50

Total Transportation: $600

Health Insurance Premium: $380

  • Groceries/restaurants: $500
  • Cell phone/internet: $175
  • Entertainment: $200
  • Other Expenses: $100

Total Expenses: $2,705

Savings Rate= 32%

With a budgeted savings rate of 32%, you seem to be in great shape and on track to reach Financial Independence in 27 years. However, things look much different if we add in the phantom costs that are often overlooked.

Monthly budget with phantom costs

  • Mortgage: $500
  • Property taxes: $175
  • Utilities: $75
  • House repairs: $168
  • Home renovations: $555
  • Landscaping: $55

Total Housing: $1,528

  • Car Payment: $550
  • Gas: $149
  • Maintenance: $99
  • Insurance: $98
  • Registration/fees: $12

Total Transportation: $908

  • Health Insurance Premium: $380
  • Other healthcare costs: $453

Total Healthcare Costs: $833

  • Groceries/restaurants: $500
  • Cell phone/internet: $175
  • Entertainment: $200
  • Other Expenses: $100

Total Expenses: $4,244

Savings Rate= -7%

Once you account for the phantom costs you discover that you are spending $286 more than you are making each month. This illustrates that failing to account for phantom costs is one of the reasons millions of people are in debt.

If your roof blows off your house, you need to get it repaired whether you have budgeted for this type of expense or not. If you don’t have the cash on hand, you will take out a loan to get it repaired because you need to have a roof on your house.

The takeaway

Some of these phantom expenses like home and car maintenance are predictable and should be included in your budget. My wife and I both contribute to a “house fund” each month which can be used for repairs or future renovations. We also contribute to a “Car fund” which can be used to cover car repairs and to pay for the price of a new car when it needs to be replaced.

Other expenses, like healthcare costs, are difficult to plan for. Nobody plans on being in a car accident, but it can happen at any time and can lead to huge hospital bills. This is why it is so important to have a strong emergency fund in place.


Do you budget for phantom costs? Are there any other phantom costs you can think of that I missed? Let me know in the comments below.

Don’t forget you can enroll in a FREE personal finance course provided by Making of a Millionaire

This article is for informational purposes only, it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions

Making of a Millionaire

Stories about money, personal finance and the path to financial independence.

Ben Le Fort

Written by

Sharing the lessons I’ve learned on my journey from debt to Financial Independence. Email me for freelance inquiries: makinfofamillionairepublishing@gmail.com

Making of a Millionaire

Stories about money, personal finance and the path to financial independence.

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